European Pellet Markets. Christian Rakos, propellets Austria

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1 European Pellet Markets Christian Rakos, propellets Austria

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3 Heat Electricity

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5 Average growth of pellet demand between 2003 and % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 45% 42% 30% 25% 21% 16% 14% Sweden Denmark Germany Italy Austria USA Average Quellen. PI R, FORCE, DEPV, AIEL, propellets 2009

6 Italy: Pellet Stove market development Total number Annual sales

7 Quarterly Prices of Fuel Oil and Pellets in Austria

8 Projections for future growth of global pellet markets in million tons

9 The policy of the European Commission: driving force for renewable energy development in Europe 20/20/20 goal: 20% less CO2, 20% share of RES, 20% increase of energy eficiency Binding targets for every member country for RES use National Renewable Energy Action Plans had to be submitted by Jun 30, cy_platform/action_plan_en.htm

10 The big question: how serious is the committement of national governments to change energy policies Very ambitious rethorics Influence of traditional energy industry on politics is clearly visible (Nuclear, CCS, heat pumps...) Renewable Energy lobbies are still very weak in comparison Economic crisis replaced energy as key policy issue Serious action only as crude oil supply crisis builds up?

11 Depletion of currently producing oil fields will likely lead to overall decline of global oil production

12 Pellets on their way to a commodity market Increasing role of wholesale trade Pellet price indices Tradefloor for pellets?

13 Wholesale pellet traders Energy traders: GEE Energy: GF Energy : Agricultural commodity traders. NIDERA: Commodity traders for forest industry products: Cellmark: Ekman:

14 Pellet price indices Key role for mitigation of risks Currenly 3 price indices are provided: ENDEX: power exchange, index based on opinions of market actors ARGUS: energy market reporting agency, index based on opinions of market actors FOEX: specialised index provider for pulp markets, index based on actual deals,

15 Recent developments in the European Pellet sector Establishment of new national pellet associations (CH, HU, FR, FI,...) Establishment of the European Pellet Council as umbrella organisation in Brussels Development of EN plus as new standard for pellet quality certification

16 The EN plus certification Striving for uniform pellet qualities in Europe

17 The new European wood pellet standard EN Defines 3 pellet qualities A1 Ash < 0,7 % A2 Ash < 1,5 % B Ash < 3,5 % Will replace national pellet standards Will be published 2010

18 Certification of producers: ensuring consistent quality of pellets several systems in place ÖNORM geprüft DIN plus FN Pellet Gold Etc.

19 EN plus an initiative to create a EU wide used certification scheme Initiated by German Pellet Assoc. Developed by German Biomass Research Centre Participation of propellets Austria Extensively reviewed by industry & certification experts Handbook of certification finalised in March

20 Key features of EN plus For A1 pellets dedicated to end users production AND supply chain are certified (Lack of quality controll in supply chain can lead to poor pellet quality) EN plus introduces (limited) traceability of pellets EN plus includes provisions regarding sustainability of feedstocks En plus includes additional quality requirements EN plus will be managed by sector

21 What does certification of producers include? Audits of the production facility, anually by certified institutions Audits can come unanounced, probability increases with number of filed complaints Tests of pellets Certification by accredited certifying bodies

22 What does certification of bulk delivery include? Quality criteria for pellet storage & manipulation Quality criteria for delivery vehicles Requirements for quality management of distributers Requirements for product information (e.g. on bags) Training requirements for workforce A system of identification numbers for traceability Etc.

23 Sustainability requirements Heavily debated Current approach: producers outside the EU have to prove the wood comes from certified forests (e.g. PEFC, FSC, other forest certification systems) Will need further discussions

24 Additional requirements for pellet quality Heavily debated Requirement for ash melting point analysis Exclusion of chemically treated wood also for Class B pellets

25 Management by the sector The European Pellet Council has been established July 1st 2010 It will become responsible for managing the EN plus system at the EU level review of hand book, management of license issues

26 The role of national pellet associations local management : e.g. negociations with certifying bodies and test labs, information of industry, feedback to the EPC Communication and promotion of EN plus Will receive license payments from trademark users - this will strenghten sectoral interest organisations

27 My vision EN plus is developed in such a way, that it is also useful for certifying industrial pellets If industrial pellets and pellets for the heat market use the same certification scheme markets would get much more flexible Technically A2 quality can be used in the heat and the power market Upcoming US certification system should allow easy certification also to EN plus

28 Next steps In Germany market introduction has started Contract between German Pellet Association and European Pellet Council is in negotiation phase European market introduction of EN plus could start 2011

29 Technology & Innovation A few examples from Austria

30 Innovations for domestic pellet boilers Further improvement of comfort Fully integrated renewable energy systems Balanced flue & flue gas condensation Full remote controll (SMS, Internet)

31 State of the art domestic boiler design Perfect combustion conditions Very low emissions Remote controll via SMS or internet Ash removal only 2-3 times a winter

32 Flue gas condensation Stainless steel tubes Automatic flushing 106% of lower heating value

33 Pellet burner integrated in storage tank Perfect solution for low energy housing Ash removal only once per year Combustion chamber Stainless steel Stainless steel chimney is required Ø 5 in Burner plate F

34 Hydronic components preinstalled Heating circulators and mixer valves Heat exchanger for domestic hot water Heat exchanger for Solar collectors preinstalled

35 Space requirement 16.5 ft 2 Capacity Range: 14,000 BTU/hr 20,000 BTU/hr 27,000 BTU/hr m

36 Flexible pellet and logwood boiler Large logs or pellets Automatic ignition 93% Efficiency (LHV) 10mg/m3 CO

37 Commercial boilers Fuel flexible! Chips & Pellets BTU /h Best commercial results

38 Pellet tower Complete production line vertical arrangement Highest safety standards Automatic operation High quality pellets

39 Vyborgskaya Cellulose, Russia t /a Project completion: August 2010 Pellet production ton/year 16 grinding machines 36 pellet machines

40 Final remarks

41 Where are European pellet heat markets heading for? Very strong increase of demand in power sector after 2012: UK, NL Predictions how fast heat market will grow more difficult oil price key factor But: heat markets WILL grow! EU pellet production capacity is limited imports will play an increasing role

42 Comparing costs and benefits of power & heat from pellets t Pellets Pelletstoves Powerplant p.a. 15 years Number of users Subsidy feed in premium 650 $ per stove 7,8 cent/kwh Total costs of subsidy 32,5 Million $ 272 Million $ Savings consumer 292 Million $ 0 Renewable energy delievered 9187 GWh 3491 GWh Ex works price pellets $/t $/t

43 Recommendation: increase effort to develop heat market in the US Lower transport costs No currency risk Significantly higher profits BUT: requires stronger efforts in advocacy and public relations

44 How do wood prices and heating oil prices compare?

45 The crystral ball... There is a bright future for pellets EU demand will grow massively in the years to come Share between power and heat market unclear & dependent on oil proice

46 How to get prepared for the big boom? Produce high quality certified pellets that can be sold in both markets Establish preconditions for local heat market development High quality standards for equipment labeling High quality of installation and after sales services Strong efforts in public relations and advocacy

47 Thank you for your attention!